Poverty impoverishes us all

David Cameron wants to reposition the Conservatives as the party of the poor. At the same time, the shadow chancellor, George Osborne, talks of the coming fiscal nightmare - of the cuts and public-service pay freezes that will have to be made and of a future Conservative government operating in a time of severe austerity. Therein lies the difficulty for the new Conservatives: how to reduce poverty as well as enhance the general well-being of the population, while grappling with a crushing fiscal deficit. It is only by squaring this circle that the new Conservatism can flourish and grow - if, that is, the party is elected. Cameron's enabling Conservatism can, indeed must, walk hand in hand with Osborne's deficit-reducing budgets. Osborne and Cameron say they are committed to achieving both greater equality and economic equity, but because of the current situation - in the middle of a budgetary recession, and with unemployment rising - nobody knows how they can deliver on their ideals.

The Tory conference in Manchester left most left-wing commentators with the strange feeling of two mutually contradictory positions being asserted with equal vigour and commitment. How can the Tories both slash public expenditure and help the poor? Equally confused were many on the right, who heard only what they wanted to hear in Manchester: they applauded the proposed public service cuts while being blind, if truth be told, to anything else, whether it be about the wider issue of poverty or the need for greater social and economic transformation.

We are facing a major crisis - our economy is as damaged as our society. But social rupture and economic dislocation occur together and must be addressed together. To save one, we must rescue the other. Outside of the Tory high command, neither left nor right seems to grasp this truth.

Economically, Labour privileged the City of London through the boom years and, in my opinion, largely ignored the country beyond the capital. The British state became addicted to tax receipts from the City and sought to create the most advantageous environment for financial exchange possible. This backfired, with the state having to underwrite the banks to the tune of £1.2trn, with a net cost to the taxpayer, according to the IMF, of £130bn. Indeed, any net cost calculation is a dubious estimate, because we do not know the true value of the assets underwritten by the public purse.

Many of those assets and trades have nothing to do with the UK. Nonetheless, the sovereignty of British taxpayers has been hugely compromised: about 60 per cent of the banks' liabilities that we guaranteed were foreign contracts, with no British counterpart. It is one thing to be a centre of investment banking, quite another to use your domestic tax base to underwrite the global trade and international contracts of that business model. This can't happen again. Yet nationally we still have not got to grips with the intertwining of global and national economies and who is responsible for what and where and when.

According to Danny Dorling, professor of human geography at Sheffield University, our society is fragmenting at a faster rate than has occurred in generations, and clustering in ever smaller and more self-referential groups. I used to think that British society was like an hourglass, coming together in the middle and spreading out at the bottom and the top, but it now appears, according to Professor Dorling, that every level of our social strata is accelerating away from every other. It is as if the rungs on the social ladder are getting ever wider apart, keeping people where they are and reducing engagement and advancement. A lack of mobility and social fragmentation is debilitating when coupled with poverty, especially for those at the bottom, who over the past 30 years have seen their income diminish, have lost most of their savings in trying to make ends meet, and have seen family and communal stability corrode and collapse before their eyes.

A new settlement of wealth, power and opportunity is needed. We cannot go back to what we had before. There have been state and market failures, and the way we manage the economy and our approach to society both need to change. We cannot go on financing an annual £200bn deficit to underpin an unproductive public sector. (Between 1997 and 2007, public-sector productivity declined by 3.4 per cent. Compare this to the private sector, where productivity rose by 27.9 per cent.) The cost of this to the nation is too high. Similarly, we can no longer keep the bottom 50 per cent of our population as permanent wage slaves; the cost of poverty to us all is, again, too high.

If this seemingly impossible task is to be accomplished, new Tory thinking is needed (Labour remains too trapped in statism and social libertarianism to deliver any profound transformation), so that the economy supports and sustains society rather than fragmenting, indebting and undermining it. However, in order to do that, a new economic model is required, one that offers a fresh account of human nature and action.

Such a shift needs cultural and ideological change as well. Cameron's Tories, unlike the left, recognise that we are in social as well as economic crisis (the left acknowledges the latter but not the former), and the party's high command is deadly serious about addressing it. But it cannot pursue economic solutions that undermine society, nor social solutions that undermine the economy. The challenge is to rethink the way we organise society, so that we can create the new model, as well as a different understanding of the relationships between trade, income and profit.

This article first appeared in the New Statesman on the 29th of October 2009